{"id":112669,"date":"2025-08-02T10:01:14","date_gmt":"2025-08-02T10:01:14","guid":{"rendered":"https:\/\/www.europesays.com\/us\/112669\/"},"modified":"2025-08-02T10:01:14","modified_gmt":"2025-08-02T10:01:14","slug":"how-can-seth-53-and-maeve-54-reach-their-goal-of-spending-120000-a-year-in-retirement","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/112669\/","title":{"rendered":"How can Seth, 53, and Maeve, 54, reach their goal of spending $120,000 a year in retirement?"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Maeve and Seth hope to retire in 2029 or earlier, and defer government benefits to age 70.Galit Rodan\/The Globe and Mail<\/p>\n

Seth is 53 years old and Maeve is 54. They have two adult children and a mortgage-free house in the Greater Toronto Area.<\/p>\n

He has his own consulting business, earning $120,000 a year plus a variable bonus. She earns $130,000 a year in the education field.<\/p>\n

Maeve has a defined benefit pension that will pay $68,418 a year, indexed to inflation, starting at age 58. That includes a bridge benefit that ends at age 65. They also have substantial savings and investments. They hope to retire in 2029 or earlier if possible. They plan to defer government benefits to age 70.<\/p>\n

Gen Z is saving for retirement better than millennials<\/a><\/p>\n

\u201cWe would like to spend a good portion of our retirement time and resources travelling,\u201d Seth adds.<\/p>\n

\u201cIf we both retire in October, 2029, when Maeve will get an unreduced pension, what level of spending can we sustain?\u201d Seth asks in an e-mail. \u201cWhich accounts should be drawn down first?\u201d<\/p>\n

We asked Steve Bridge, a certified financial planner with Money Coaches Canada, to look at Seth and Maeve\u2019s situation.<\/p>\n

What the expert says<\/p>\n

\u201cSeth and Maeve have done a good job managing their money,\u201d Mr. Bridge says. <\/p>\n

\u201cThey did an excellent job looking at all categories of expenses and estimating retirement spending,\u201d he says. \u201cIt\u2019s worth taking the time to do this because target spending is the most important number in retirement planning.\u201d<\/p>\n

Maeve and Seth would like to retire in 2029 at ages 57 and 58, or <\/b>possibly earlier. They are looking to spend $120,000 a year after tax. <\/p>\n

They plan to defer Canada Pension Plan and Old Age Security benefits to age 70, \u201cwhich is a good idea.\u201d Doing so will provide more guaranteed income later in life. <\/p>\n

Deferring government benefits and drawing down RRSPs\/RRIFs early will help to avoid a large tax bill for the estate. Any money left in these accounts when the last spouse dies is fully taxed as income on their final tax return. <\/p>\n

Maeve will get $68,418 per year starting at age 58, decreasing to $60,892 at age 65 per year for life, indexed to inflation. <\/p>\n

Her pension has a 60 per cent joint survivor option with a 10-year guarantee benefit, so Seth would receive 60 per cent if Maeve were to die prematurely, and their children would receive payments if they were both to die before the 10 years were up. \u201cThey should revisit whether to take a 60 per cent or a 100 per cent survivor benefit when the time comes, as this decision depends on their health, other savings, peace of mind and various other factors,\u201d Mr. Bridge says. <\/p>\n

Maeve may decide to retire early to help her elderly parent. The planner suggests she consider other alternatives. \u201cCould they hire someone? Or, could Seth help out when required until Maeve retires?\u201d<\/p>\n

If they work until 2029, they will be in good financial shape even if they save no more money, Mr. Bridge says. His calculations assume an average annual inflation rate of 2.5 per cent, an average rate of return on investments of 4.9 per cent, and deferred CPP benefits of $1,852.58 for him and $1,833.40 for her, which would be about 70 per cent of the maximum at the time. <\/p>\n

Based on the above, they are projected to be able to spend $171,000 per year, after-tax, to age 95. In their first full year of retirement, this breaks down as follows: $62,459 from non-registered accounts, $65,000 from RRIFs, $27,595 from his corporation and $68,418 from her pension. <\/p>\n

This would leave their only home to their estate, although it is more than likely there will be assets remaining in addition to their home. If they choose to downsize to a lower-priced home in future, it would provide even more money. <\/p>\n

\u201cPerhaps Seth will retire a year or two before Maeve and start drawing down his RRSPs while he is in a very low tax bracket,\u201d Mr. Bridge says. \u201cThis would depend on how they feel about retiring at the same time.\u201d<\/p>\n

With $4.4-million, how should Omar and Tanya withdraw funds in retirement to pay less tax?<\/a><\/p>\n

If, instead of 2029, they choose to retire in 2027 with a reduced pension and CPP entitlement, they are estimated to be able to spend $157,000 per year after tax, leaving their only home to their estate, Mr. Bridge says. <\/p>\n

If they spend $120,000 a year, which is their target, they will accumulate substantial savings that will be left to their estate, the planner says. This would result in an estimated post-tax estate of $4-million, including the value of their home. <\/p>\n

Rather than leaving a large estate, \u201cthey may want to help their children financially, or donate to causes they believe in along the way, which will not only make them feel good, but will lessen their tax liability,\u201d he says. <\/p>\n

\u201cAnother thing to think about is that spending habits change over time,\u201d the planner says. Discretionary spending, such as travel, may decrease at some point, but health care costs may increase. \u201cVariables such as these are why ongoing financial planning is a lifelong exercise.\u201d <\/p>\n

Their investment allocation is 75 per cent stocks and 25 per cent fixed income and cash, \u201cwhich is fine considering Maeve has a defined benefit pension and they are comfortable with the volatility,\u201d Mr. Bridge says. <\/p>\n

Their portfolio consists of five broad, globally diversified, low-fee index funds, plus some guaranteed investment certificates. \u201cThey have target allocations and appear to rebalance almost exactly to them,\u201d the planner says. They may want to reduce their equity exposure later on. <\/p>\n

He recommends they keep cash and GICs to protect against prolonged dips in global stock markets.<\/p>\n

As to which accounts they should draw down first, \u201cthere\u2019s no one-size-fits-all answer here,\u201d Mr. Bridge says. It\u2019s a complex decision that requires ongoing, annual planning. <\/p>\n

\u201cA good starting point is to convert at least part of the RRSPs to RRIFs upon retirement and begin drawing from them relatively aggressively before starting CPP and OAS at age 70,\u201d the planner says. \u201cThis can reduce the overall tax burden on RRSP\/RRIF funds \u2013 even if they don\u2019t need the money right away \u2013 by spreading out taxable income over time.\u201d<\/p>\n

A professional can help determine the best withdrawal amounts each year based on changing circumstances, says Mr. Bridge.<\/p>\n

\u201cIt is worth engaging an advice-only financial planner to prepare a comprehensive plan and work with you over the coming years, as they make this transition and beyond,\u201d he says. \u201cThese are big numbers, and multiple factors need to be considered.\u201d<\/p>\n

Client situation<\/p>\n

The People:<\/b> Seth, 53, Maeve, 54, and their two children, 23 and 25.<\/p>\n

The Problem:<\/b> Can they afford to retire in 2029 with $120,000 a year in spending? What is the best strategy for drawing down their investments?<\/p>\n

The Payoff:<\/b> Options to help their children financially or give to favourite charities if they choose to.<\/p>\n

Monthly net income: <\/b>$14,935. <\/p>\n

Assets:<\/b> Joint bank account $40,000; his stock portfolio $447,485; her stock portfolio $429,585; his holding company investments $238,388; his TFSA $121,345; her TFSA $133,322; his RRSP $876,434; her RRSP $437,677; residence $1,400,000. Total: $4.1-million.<\/p>\n

Estimated present value of the pension is $1.15-million, using a 3.7 per cent discount rate. This is what someone with no pension would need to save to generate the same income.<\/p>\n

Monthly outlays:<\/b> Property tax $550; water, sewer, garbage $55; home insurance $105; electricity $210; heating $75; maintenance $840; car insurance $350; other transportation $395; groceries $670; clothing $350; gifts, charity $225; vacation, travel $1,250; other discretionary $800; dining, drinks, entertainment $950; personal care $240; pets $50; sports, hobbies $680; subscriptions $140; life insurance $155; disability insurance $305; phones, TV, internet $260; RRSPs $2,000; TFSAs $1,165; her pension plan contributions $1,000. Total: $12,820.<\/p>\n

Liabilities: <\/b>None.<\/p>\n

Want a free financial facelift? E-mail finfacelift@gmail.com<\/a>.<\/p>\n

Some details may be changed to protect the privacy of the persons profiled.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Maeve and Seth hope to retire in 2029 or earlier, and defer government…\n","protected":false},"author":3,"featured_media":112670,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[64,1875,255,67,132,68],"class_list":{"0":"post-112669","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-financialfacelift","10":"tag-personal-finance","11":"tag-united-states","12":"tag-unitedstates","13":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/114958597442975581","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/112669","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=112669"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/112669\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/112670"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=112669"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=112669"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=112669"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}